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HomeMy WebLinkAboutMINUTES - 06032008 - SD.6 C . TO: BOARD OF SUPERVISORS Contra FROM: William Walker,M.D., Health Services Director Costa By: Jacqueline Pigg, Contracts Administrator County Sra'co6K`� DATE: June 3,2008 SUBJECT: Approval of Grant from Kaiser Permanente Northern California Fund for Community Benefit, for transfer to the Doctors Medical Center Management Authority SPECIFIC REQUEST(S)OR RECOMMENDATIONS)&BACKGROUND JUSTIFICATION 'RECOMMENDATION(S): APPROVE Grant Agreement #28-316 from Kaiser Permanente Northern California Fund for Community Benefit, at the East Bay Community Foundation, to pay the County the total amount of $12,000,000 over three (3) years in annual installments of $4,000,000 to be transferred to the Doctors Medical Center Management Authority (JPA) under the conditions specified in the Grant Agreement; RATIFY the execution of the Grant Agreement by Patrick Godley, Health Services Financial Officer; and AUTHORIZE the Health Services Department to transfer the Grant Funds to the Doctors Medical Center Management Authority (JPA) in accordance with the terms of the Grant Agreement. FISCAL IMPACT• Approval of this Grant Agreement will result in $12,000,000 over three (3) years in installments of$4,000,000 each year to be transferred to the Doctors Medical Center Management Authority (JPA) for the purposes set forth in the Grant Agreement. No County matching funds are required. The Grant is conditioned upon the County first receiving the Grant Funds and acting as the fiscal intermediary for the Doctors Medical Center Management Authority(JPA). The County will receive the Grant Funds,and when the grant requirements are met by the JPA, the County will transfer the funds to the JPA. BACKGROUND/REASON(S)FOR RECOMMENDATION(S): This Grant Agreement#28-316 from the Kaiser Permanente Northern California Fund for Community Benefit, at East Bay Community Foundation will allow Doctors Medical Center to provide indigent medical care to vulnerable populations in West Contra Costa County and redesign clinical services to improve patient care and support long-term financial viability for the period from May 1, 2008 through May 1, 2010. Doctors Medical Center San Pablo (DMC) is the largest full service acute care hospital serving 250,000 people in the western portion of Contra Costa County, part of the East Bay area of Northern California. With more than 40,000 Emergency Department visits annually, DMC provides essential emergency and medical services to a community CONTINUED ON ATTACHMENT: X YES S GNATURE: RECOMMENDATION OF COUNTY ADMINISTRATOR - RECOMMENDATION OF BOARD COMMITTEE APPROVE OTHER SIGNATURES ACTION OF BOARD G/N - APPROVED AS RECOMMENDED OTHER _ V TE OF SUPERVIS S � I HEREBY CERTIFY THAT'fHIS IS A TRUE /o pw" AND CORRECT COPY OF AN ACTION TAKEN UNANIMOUS (ABSENTi AND ENTERED ON THE MINUTES OF THE BOARD AYES: NOES: �j64 tW (4 OF SUPERVISORS ON THE DATE SHOWN. ABSENT: ABSTAIN:.. ATTESTED ""` . 3, a Contact Person: Pat Godley(957-5405) JOHN CULLEN, CLERK OF THE BOARD OF CC: Health Services Department (Contracts) SUPE VISORS AND COUNTY ADMINISTRATOR Grantor BY ( DEPUTY Board Order Page t #28-316 where a large proportion of residents are uninsured, underinsured, or Medi-Cal beneficiaries – in fact.nearly 30% of the families in the DMC service area live below the poverty. level. The median household income in San Pablo is the lowest of any city in the West County area and is below the State median. Health disparities are an important issue in West County.According to the recent health report, Community Indicators for Contra Costa County(June 2007), Contra Costa communities with the highest percentage of low-income and non- white residents — including San Pablo and;Richmond — experience higher death and disease rates than the county overall for many chronic and communicable diseases, injuries, and maternal and child health issues. Children in Richmond and San Pablo are more likely to be hospitalized for asthma than those in the remainder of the County. The U.S. Census report for 2000 shows that only 16.2% of the population of San Pablo is white. This is the lowest percentage of white people in the County. In 2004, the hospital's future was at risk of becoming one more California hospital in a low-income community that closed its doors due to a deteriorating financial situation. Tenet Health Sysiems, which operated the hospital for six years, left that year. With little reserves and inadequate time to prepare for a major transition, the Healthcare District organized to take over hospital operations. The.Healthcare District inherited a hospital with scarce hospital financial information available, a new and inexperienced business office, incomplete information technology systems, poor relationships with payers, and no`cash. The.effort to save the hospital was necessary, however, to salvage a medical care provider that, for many residents of the area, provides the only access to necessary healthcare for both inpatient and emergency services. In response to the dire circumstances and the. need to keep the hospital open, in 2004 residents of West Contra Costa overwhelmingly supported a parcel tax to subsidize hospital operations. Following this 2004 transition,the hospital made little progress in addressing the fiscal shortfall. The fiscal year 2005 and 2006 operating losses were $22.9 million and $29.5 million, respectively. In late 2006, the organization faced serious financial obstacles and had grim prospects of overcoming these adversities. Cash on hand was down to five days and the organization was losing in excess of$3 million each month..,With the negative operating performance and the capital requirements necessary for DMC to remain viable, the hospital's cash balance was projected at a deficit of approximately$35 million by the end of 2006. Steps Toward Change In September 2006, the Healthcare District declared a financial emergency and authorized the filing of a bankruptcy petition in an effort to keep the hospital open. On October 1; 2006, the Healthcare District filed a voluntary petition for Chapter 9 bankruptcy protection: On October 31, 2006, the Contra Costa County Board of Supervisors approved the general structure of a recovery plan (the "Recovery Plan") to maintain services at Doctors Medical Center. The participants in the Recovery Plan are the County, the Healthcare District,:the physician groups that independently admit patients to the hospital, the State, and the bankruptcy court, all of whom approved the general structure. The Recovery Plan,.in part, includes: (i) execution of a joint powers financing agreement between the County and Doctors Medical Center to .establish 'a joint management board on which the County will have majority representation; (ii) execution.of Ori'agreement between the County. and the Healthcare District for the temporary transfer, in installments, from the County General Fund, through June 30,=2007 of up to $10 million to the State's General Fund, which funds will be matched by the federal government and used by the State to provide enhanced Medi-Cal payments to Doctors Medical Center; and (iii) annual reallocation of approximately $2.5 million of ad valorem property,tax revenues that.would otherwise be allocated to the Healthcare District in each of four successive years.commencing with the Fiscal;Year beginning July 1, 2007, to the 'County, to repay the County's transfer discussed in (ii) above. On February 5, 2007; the board of directors of the Healthcare District unanimously approved Board Order Page 3 #28-316 the creation of a Joint Powers.Authority .(JPA). On February 6, 2007, the Board of Supervisors unanimously approved the creation of the Joint Powers Authority. The Doctors Medical Center Management Authority (JPA), was organized pursuant to a Joint Exercise of Powers Agreement entered into in February 2007,between the County and the Healthcare District. The JPA is governed by a seven-member board of directors comprised of two members from the Healthcare District, one affiliated physician representing the Doctors Medical Center medical staff,and four County members. The County members of the JPA are the Director of County Health Services, the Chief Financial Officer of County Health Services, and two members of the Board of Supervisors. All business functions concerning the hospital must receive JPA approval. The JPA replaced all of the previous Hospital Administration (CEO, COO; CNO, CFO and Controller). In January 2007, a nationally recognized healthcare firm, Wellspring Management Services, was retained to provide interim executive leadership, and to develop a turnaround plan. Over the past nine months, improvements have been made and the monthly operating loss has been reduced to less than $2 million. Further improvements will be implemented over the next six to twelve months. In the spring and summer 2007, Wellspring completed an assessment of operations, a high level review of strategic campus options, and a portfolio analysis of all inpatient and outpatient clinical programs. A Turnaround Plan/Business Plan was outlined. In July 2007, the Doctors Medical.Center Board approved implementation of the initiatives identified by Wellspring. Since the middle of 2007,Doctors Medical Center's Board and advisors have been in negotiations with the Unsecured Creditors Committee —that group appointed by the United States Trustee and Court to work with Doctors Medical Center on behalf of all the creditors.with unsecured claims in this bankruptcy. It is Doctors Medical Center's intent that by March 31, 2008, the hospital will produce the initial"Plan of Reorganization"that outlines the approach to be used in restructuring its unsecured (primarily vendor, employee and provider) debt, and proposes the payment approach to resolve those obligations. The ultimate path and timeframe for approval of the Plan of Reorganization and emergence from bankruptcy is dependent, in part, on further negotiation and discussion with the Unsecured Creditors Committee and the ability of Doctors Medical Center to finalize a viable plan to fill the projected operating gap. It is anticipated that emergence from bankruptcy will occur in the third quarter of 2008. Although the monthly operating loses have declined and, assuming that volume and payer mix do not significantly change from current levels, Doctors Medical Center was projected to have a $17 million deficit at the end of 2008. In recognition of the need for additional funding to maintain ongoing operations, County executives negotiated with the State and Federal governments to provide a dependable, sustainable cash infusion over the next three years. The result of these negotiations reduced the funding gap for Doctors Medical Center to $5 million per year. The Kaiser Grant of $4 million per year, which is the subject of this Board Order, will further reduce that funding gap. The County, as a public agency, is authorized by Government Code section 6504 to transfer the Kaiser Grant funds to the JPA, of which the County is a member, in accordance with the terms of the Kaiser Grant and for the purposes set forth in the Joint Powers Agreement establishing Doctors Medical Center Management Authority. Three certified and sealed copies of the Board Order should be returned to the Contracts and Grants Unit. ADDENDUM to SD.6 June 3, 2008 On this day the Board considered approving and authorizing the Health Services Director, or designee, to execute Grant Agreement with the Kaiser Permanente Northern California Fund for Community Benefit, at the East Bay Community Foundation, to pay the County an amount not to exceed $12,000,000 for Doctors Medical Center- Healthcare for West ContraCosta County, for the period May 1, 2008 through May 1, 2010. Health Services Director, Dr. William Walker noted the Grant Agreement from Kaiser Permanente Northern California Fund for Community Benefit will allow Doctors Medical Center to provide indigent medical care to vulnerable populations in West Contra Costa County and redesign clinical services to improve patient care and support long term viability from May 1, 2008 to May 1, 2010. Chair Glover congratulated Dr.'Walker and staff for the hard work that went into this project. The Chair called for public'comment on the matter. The following person provided testimony: Roland Katz, Business Agent, Local 1 congratulated the Board for the excellent work. By an unanimous vote, with all Supervisors present, the Board approved the recommendation on the Board Order. A 1, a REQUEST TO SPEAK FORM (3 Minute Limit) L wish.to speak on AeriTd"a Item Complete this form and place it to the upright box near the Date speaker's podium, aild wait to be called by the Chair. 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